The number of operating appointed representitives has fallen by 19% since 2020, following new FCA rules which strengthened the AR regime.
In 2022, the FCA introduced new rules to make authorised financial firms more responsible for their appointed representatives (ARs).
The regulator said that "some principals do not adequately oversee the activities of their ARs. Consumers risk being mis-led and mis-sold, while misconduct by ARs can undermine market integrity".
Under the new rules, which took effect in December 2022, principal firms need to:
- Apply enhanced oversight of their ARs, including ensuring they have adequate systems, controls and resources.
- Assess and monitor the risk that their ARs pose to consumers and markets, providing similar oversight as they would to their own business.
- Review information on their ARs’ activities, business and senior management annually, and be clear on the circumstances when they should terminate an AR relationship.
- Notify the FCA of future AR appointments 30 calendar days before it takes effect.
- Provide complaints and revenue information for each AR to the FCA on an annual basis.
Following the introduction of the new rules, the FCA's annual report shows that there are currently around 35,000 ARs, including introducer appointed representatives (IARs), operating in the AR regime, down from around 43,000 in 2020, a 19% decline.
The FCA added that its supervisory interventions between July 2022 and 31 March 2023 have seen principals terminating relationships with 153 ARs and 618 IARs.
The FCA & Practitioner Panel survey 2022/23 showed that 56% of principal firms surveyed think oversight of ARs by principal firms in their sector has improved.
However, while complaints for both 2021 and 2022 show an improved position for principal firms, the FCA says principal firms and their ARs still generate more complaints than non-principal firms overall.
As a result, the FCA is continuing work with the Treasury to assess whether wider legislative changes are needed.
FCA removes authorisation for 627 firms
In addition to it's work on appointed representitives, in the past year the FCA has stopped 627 firms, that failed to meet the minimum standards, from operating, up 30% from the previous year.
Ashley Alder, chair of the FCA, said: "Maintaining high standards is key to supporting growth. We are helping firms test their innovative products, guiding firms through the authorisation process and are supporting a range of supply and demand-side market reforms.
"On the 31 July, the new Consumer Duty will raise the bar for retail financial services and place good consumer outcomes at the heart of everything they do."
Nikhil Rathi, chief executive of the FCA, commented: "The FCA has evolved into a more proactive, assertive and data-led regulator better equipped to face challenges like the rising cost of living in a more agile and effective way.
"Tailored support is important for those struggling with debt and we continue to work with firms to make sure people receive the right help to manage their finances, especially with the rising cost of living."
